When the CEO goes Adrift in the Channels of Business Communication

Inspired by some recent comments posted by Don, here’s a little story that might drive home some of the points I’ve tried to make in my posts filed under the Never Fail to Amaze category. The names of the companies mentioned here are fictitious but the events really happened.

I was working for EFG Company. We were a mid-sized firm in the throes of slumping sales and profits. The CEO had recently met with the Board of Directors as well as some consultants that they had brought in to help pull things out of the doldrums. The stockholders were not happy with our financial results. We were all waiting to see what new directive would be coming down the pike. Something goofy always seemed to happen after these events.

It was January and the beginning of a new fiscal year as well as our newly mandated “breakout” period. Each week and particularly at the beginning of the month, we’d have a management meeting to discuss the forecast for the month and the progress towards meeting it. The customer service manager would always report on open sales orders. The sales forecast was a key indicator and driver of the upcoming month’s activity. As the customer service manager led us down the open order list, the CEO frantically interrupted in an excited manner, “What’s going on with these NABCO orders?” he snapped, “This can’t be right. These orders are down 50% from last month!” The customer service manager replied that the NABCO orders were received electronically and that was what the latest data exchange indicated. “That can’t be right,” reiterated the CEO, “I recently spoke with NABCO’s president, Don Black. He told me that orders would be unchanged.” The customer service manager repeated that the orders had always been received electronically and were always right on the mark. The CEO was unimpressed. “I want a full investigation into this and a report back tomorrow. Either you’ve made a mistake or you’re obviously not getting the right information.”

NABCO had been a customer for several years. They were a huge corporation and we only had dealings with one of their smaller divisions. As a supplier to NABCO, we were probably in their “peanuts” category. They represented about 10% of our sales. We all knew that the orders from their plant in Kansas City were received via EDI. We could not understand the CEO’s fixation on the issue.

The next day, we met again. The customer service manager reported that the electronic data exchange had been verified and the orders were correct. “I don’t believe that!” interjected the CEO, “You can’t just rely on electronic data. Don Black told me that the orders hadn’t changed. That’s the whole problem here at EFG. There’s too much reliance on electronics and data. We need more personal relationships with our customers. You’d better develop a personal contact at NABCO and get the straight dope!”

Ah ha! It was the old “develop personal relationships with the customers” catchphrase. That must have been the latest mandate and “Programme du jour“ dictated by the board and consultants. Based on prior history, we figured that this new focus on customer contact development was being triggered by a requirement to increase EFG’s sales and market share. EFG hadn’t prospected any new customers or developed any new products in years. It made sense that the board would push for this.

Sales had always been within the personal purview of the CEO. He fashioned himself as a sales “guru” but never really accomplished anything. He must have received a strong message of disapproval and strict marching orders. We middle managers knew that since the blame for poor performance always had to be shared, (You know how bad things always roll down hill.) we’d catch the brunt of it all. If the new theme pushed by the consultants was developing personal customer relationships, then the original context of that message or to whom it was being aimed was irrelevant. WE needed to correct OUR behaviors. The CEO would teach us. We now understood what “wild goose” we’d be chasing and why.

So the following day, we met again. This time, the customer service manager reported that he had spent most of the previous day tracking down the NABCO buyer who was in charge of our account. The EFG salesman who had originally landed it was long gone and the contact files were outdated. This was compounded by the fact that NABCO had a huge bureaucracy and their buyers had turned over many times. When he was finally able to get through a live person, they confirmed that all NABCO orders to suppliers were sent electronically via EDI and correct as transmitted. As a side note, the customer service manager reported that the NABCO contact seemed miffed that their EDI process would even be questioned. NABCO had spent a great deal of time and money developing a paperless data exchange. Strict adherence to NABCO’s EDI system was a condition of doing business with them. They wanted no more and no less of the materials that they ordered. “Well I spoke with Don Black again yesterday,” scowled the CEO, “He’s the president! He said that there was no problem with our orders. You’re not talking to the right person. If we only produce at 50% of last month’s orders, we’ll miss our sales quota with NABCO and lose the account! You’d better start getting some better contacts. This is why we’re failing!”

The circus continued for another week during which a tremendous amount of time and energy was expended tracking down everyone at NABCO we could think of to verify the data. Our operations folks even went as far as contacting a night shift foreman at NABCO’s Kansas City plant to verify their production requirements. Our CEO was furious. HE had the correct information from HIS contact – NABCO’s president. WE were incompetent and unable to develop personal contacts with the customer to validate it. When the incessant scolding from the CEO had reached its apex, the customer service manager sheepishly asked if he could personally contact Don Black to determine the reason for the apparent disconnect in the information. The CEO became even more infuriated by the mere thought of that. How could anyone dare question the information provided by the president of NABCO? Besides, Don Black was HIS contact. WE were supposed to develop our own. WE were the one’s who were to blame for lack of sales.

In the end, we produced to the NABCO orders that had been received via the EDI transmission. We followed the same process we had for years. There were no non-conformances or production shortfalls reported back to our firm. NABCO’s orders remained down for months. In time, all of the tension and tempers finally subsided. The CEO never broached the subject again. He just suddenly stopped talking about it. We simply moved on to a different fire drill. Overall, EFG sales never increased that year.

I would have loved to have been a fly on the wall during those conversations between our CEO and the president of NABCO. I’m sure that the channels of communication in the areas of cutesy small talk regarding professional or college sports, golf, yachting, summer homes on Cape Cod, villas in Tuscany or whatever CEO’s and presidents converse about were clear and concise. A “personal relationship with the customer” had probably been developed. Did the president of NABCO actually know (or even care) about NABCO’s purchases from our company? Was an increase in sales or new products even discussed? Wasn’t that the whole point of developing the personal contact?

Unfortunately, when it came to the day-to-day business dealings between our firms, our CEO (that brilliant “Titan of Industry”) did not seem to understand that communication at that level was better left to an agreed upon tested process and those who operate it. It was his job to increase sales and not to meddle in the ordering process. Who was really failing here?

And you wonder why I never fail to be amazed?

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